What is the Best Financing Strategy?

Question

Hey there BiggerPockets Members in Ontario Canada!

I am looking on financing advice.

I am currently in my 2nd live in flip deal, and  only have experience with standard financing (personal money or the down payment, and a bank for the mortgage).

Ideally I would have like to get into my 3rd deal using a Home Equity Line of my current property; the issue is that we are in the midst of renovations that will not be complete for another few months, and an attractive deal has popped up. This means that I can't borrow against my house, and do not have sufficient savings for a down payment.

What are the best financing options to purchase a property in this situation? It is a duplex that will require about $45,000 in rehab costs, and take an estimated 2 months to rehab.

Jacob Perez · Answer

Hey @Birtha Wall - I'm doing a seminar around 12 PM but would be happy to jump on a call. Giving some options will be based on getting a few answers regarding your situation.

Jacob

Birtha Wall · Answer

Thank you to everyone that responded to my post, it was incredibly helpful! I heard back from a few mortgage brokers, and I got the answer I expected: "sorry but no" due to a combo of a higher risk property, and no down payment or repair costs saved up. However there is a lot of opportunity here for a recon mission. What can be learned, what experience can be gained, what relationships can be built.

I have a few people that I have a good relationship with, that also have real estate interests/experience that I can approach to see if they are interested in a joint venture. They provide the funds, I manage the flip/paperwork/tenants/etc., they get their principle + interest back when we re-finance. Being realistic, there is very little chance that I end up with this deal in the end, but I can use this as a practice run, and hey, if we get the property in the end, it would just be the cherry on top.

Any advice from someone that has experience with a joint venture? What are the pros & cons? What are signs that things are going well/not so well? What are the ground rules?

Birtha Wall · Answer

@Brian Ellis

The interior has not been touched cosmetically. I fixed the support in the attic, did vapour barrier and spray foam insulation in the crawl space. We also built a 17x20 detached garage/workshop. I'm not confident that we have added enough value to be able to pull she equity money out.

Walter Weinreich · Answer

@Birtha Wall

Adding to the suggestions that have already been made, you can try some of the following options...

-Financing from the Seller

-Partner with the seller and give them equity when you re-sell

-Get a hard money/private lender

-Equity loan

Brian Ellis · Answer

How much more work needs to be done on your primary? You can still receive a HELOC even if the property isn't completely renovated.

Mike Oliveira · Answer

You could look for a joint venture/private money

Seth Ferguson · Answer

@Birtha Wall

@Jacob Perez is a great guy to talk to! Interviewed him for my show recently.

What is the Best Financing Strategy?

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